“Corruption Proofing” Statutes and Regulations: The Next Big Thing in Anticorruption Strategy?

So-called “corruption proofing” is an ex ante preventive measure that entails review of the form and substance of legal acts (principally statutes or regulations) in order to minimize the risk of future corruption. It is a relatively new strategy in the anticorruption toolkit. As of 2015, 13 countries had enacted some form of corruption proofing: Armenia, Albania, Azerbaijan, Kazakhstan, South Korea, Kyrgyzstan, Latvia, Lithuania, Moldova, Russia, Tajikistan, Ukraine, and Uzbekistan.

While there is some divergence between each country’s specific practices, generally a corruption proofing system requires that draft and/or existing legal acts (statutes and regulations) are subjected to a review process by a designated institution (or institutions), which are tasked with identifying corruptogenic factors”—aspects of those laws that might create risks of future corruption. Examples of corruptogenic factors that corruption proofing systems have identified include unclear definitions of the rights and duties of public officials; broad discretionary power; over-broad freedom to enact by-laws and other subsidiary legislation; linguistic ambiguity; inadequate sanctions; lack of (or conflicting) regulatory and administrative procedures; and disproportionate burdens on citizens to exercise their rights. The reviewing institution then makes recommendations for changes to the law that would mitigate those risks. The governmental body from which the legal acts originate (the parliament, in the case of statutes) is obligated to consider these recommendations but is not required to implement them, though in some systems the governmental body must state its reasons for rejecting the reviewing institution’s recommendations. Another common practice is that the proofing agency’s recommendations (and, if applicable, the explanations for why they were disregarded) are circulated as an annex to the draft law being debated in the legislature and are also published online, thus providing both lawmakers and citizens with more information about the potential corruptogenic factors associated with the law. Continue reading

The Case for Preserving South Korea’s Crackdown on Gifts

In September 2016, South Korea’s Improper Solicitations and Graft Prohibition Act, better known as the “Kim Young-ran Law,” came into effect. The Kim Young-ran Law, regarded by some as the strictest anti-graft law in the world, included important provisions aimed at combating Korea’s deep-seated gift-giving culture that infested the public sector and cultivated corruption (including, for example, the corruption blamed for the 2014 Sewol ferry disaster, as well as the scandals that ultimately led to the impeachment of former President Park Geun-hye in 2017). The law’s provisions on gifts ban public servants, educators, and journalists from receiving free meals worth over 30,000 won ($28), gifts over 50,000 won ($46), and congratulatory or condolence money over 100,000 won ($92)—the so-called “3-5-10” restriction.

Although a majority of the Korean public believes that the Kim Young-ran Law has been effective in reducing bribery, the restrictions on gifts were widely perceived as too strict, with almost two-thirds of surveyed Koreans supporting an amendment that would loosen the 3-5-10 thresholds. In light of this, in December 2017 the legislature revised the law to double the price limits on gifts for agricultural, livestock, and fishery goods to 100,000 won, and to reduce the allowance for congratulatory or condolence money to 50,000 won—so, it’s still a “3-5-10” restriction, though the “5” and the “10” have flipped. However, scholars are concerned that even this alteration of the original rules would set a precedent for changes and exceptions that would defeat the initial spirit and purpose of the Kim Young-ran Law. Indeed, the arguments for relaxing the gift limitations do not withstand scrutiny; it was likely a mistake for South Korea to give in to pressure to amend the law, and it would certainly be a much graver mistake to relax the 3-5-10 thresholds further. Those who believe that the Kim Young-ran law’s limits on gifts are too stringent have advanced three major critiques, but none of them is persuasive:

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Two Essential Volumes on Corruption

The study of corruption and what to do about it is no longer an academic or policy-studies backwater.  Matthew’s bibliography of corruption-related publications now lists over 6,000 books, articles, and reports and, as his regular updates show (thank you Matthew), the list continues to grow at the rate of some 50 plus per month.  That is the good news.  It is also of the course the bad news.  Few practitioners, and I suspect even academics, can claim to have absorbed the learning in the 6,000 current documents let alone keep up with the outpouring of new works.

For those who can’t , I recommend two recent books: Dan Hough’s Analysing Corruption and Alina Mungui-Pippidi and Michael Johnston’s Transitions to Good Governance: Creating Virtuous Circles of Anti-Corruption.  Both do an excellent job of synthesizing and extending recent scholarship on corruption issues, and both do so in a sophisticated but accessible manner.  Both have the added virtue of being available in reasonably priced paperback editions. Continue reading

Why Samsung’s Recent Conviction Will Not Rid South Korea of Chaebols

Samsung is in search of a new leader after Jay Y. Lee, grandson of Samsung’s founder, was convicted of bribing South Korea’s President to approve a controversial merger between two Samsung affiliates. Many thought that the proposed merger, which had been heavily criticized by independent analysts and investors, would not receive the legally-required approval from then-President Park Geun-hye’s administration. Lee allegedly bribed President and people close to her, to the tune of $38 million, for her support. When this corruption was exposed, President Park resigned and Lee was prosecuted and ultimately convicted.

Some hope that these dramatic developments portend more far-reaching changes in South Korea’s economy—in particular, the destruction of the chaebols (literally “wealth clans”), the multinational conglomerates in which leadership is passed from person to person within a family. Many credit chaebols with the successful post-World War II transformation of South Korea’s agrarian economy into an international economic powerhouse, but others criticize chaebols on a number of grounds, including the claim that they concentrate power and wealth in the hands of a small family minority, pay low dividends to ordinary investors, and facilitate the sort of grand corruption exposed in the Samsung affair.

After President Park resigned in disgrace, she was replaced by President Moon Jae-in, promised to put an end to chaebols altogether. Alas, this is unlikely. Indeed, it’s looking increasingly like Samsung’s recent scandal will not have a lasting effect on chaebols, or even on Samsung’s long-term profitability. Continue reading

When Lunch is a Bribe: American and Korean Law Compared

It is the rare businessperson or lobbyist who takes a politician or bureaucrat they barely know to lunch just for the pleasure of their company.  Lunch-buyers may enjoy the food (particularly if the money comes out a corporate pocket) and not all politicians and bureaucrats are self-centered bores.  But face it: the main reason bureaucrats and politicians world-wide are wined and dined by people they hardly know is because they are in positions of power and the meal-buyers want to influence them — perhaps to persuade them to purchase the lunch-buyer’s product for their ministries, maybe to change their minds about pending legislation.  Yet as obvious as the reason for picking up a lunch the tab is, in the Republic of Korea, and many American jurisdictions as well, on its face the law provides that if lunch-buyers admit why they paid for lunch, they and their luncheon companion go to jail.

That despite these laws Seoul’s upscale restaurants and their counterparts in many American state capitols continue to do a brisk lunchtime business suggests many lunch-buying businesspersons and lobbyists and their government guests regularly deny the obvious.  It would be one thing if lawmakers had intended to turn this group into liars and hypocrites, but they did not.  It is instead an unintended consequence of laws actually meant to permit public servants to take lunch with those having business with them. Continue reading

London Anticorruption Summit–Country Commitment Scorecard, Part 2

This post is the second half of my attempt to summarize the commitments (or lack thereof) in the country statements of the 41 countries that attended last week’s London Anticorruption Summit, in four areas highlighted by the Summit’s final Communique:

  1. Increasing access to information on the true beneficial owners of companies, and possibly other legal entities, perhaps through central registers;
  2. Increasing transparency in public procurement;
  3. Strengthening the independence and capacity of national audit institutions, and publicizing audit results (and, more generally, increasing fiscal transparency in other ways); and
  4. Encouraging whistleblowers, strengthening their protection from various forms or retaliation, and developing systems to ensure that law enforcement takes prompt action in response to whistleblower complaints.

These are not the only subjects covered by the Communique and discussed in the country statements. (Other topics include improving asset recovery mechanisms, facilitating more international cooperation and information sharing, joining new initiatives to fight corruption in sports, improving transparency in the extractive sector through initiatives like the Extractive Industries Transparency Initiative, additional measures to fight tax evasion, and several others.) I chose these four partly because they seemed to me of particular importance, and partly because the Communique’s discussion of these four areas seemed particularly focused on prompting substantive legal changes, rather than general improvements in existing mechanisms.

Plenty of others have already provided useful comprehensive assessments of what the country commitments did and did not achieve. My hope is that presenting the results of the rather tedious exercise of going through each country statement one by one for the language on these four issues, and presenting the results in summary form, will be helpful to others out there who want to try to get a sense of how the individual country commitments do or don’t match up against the recommendations in the Communique. My last post covered Afghanistan–Malta; today’s post covers the remaining country statements, Mexico–United States: Continue reading

South Korea’s Corruption Crisis: Sung Wan-jong’s List and Its Fallout

The South Korean political scene is embroiled in a sensational corruption scandal–one that erupted when Sung Wan-jong, a successful businessman whose company was facing financial problems, was found dead (he had hanged himself), holding onto a note containing the names of South Korean officials he had bribed, and the amounts involved. In this note–now known as “Sung Wan-jong’s list”–Mr. Sung wrote that he gave 700 million won (US$639,971) to former Presidential Chief of Staff Huh Tae-yeol, 300 million won (US$274,273) to Incheon Mayor Yoo Jeong-bok, 100 million won (US$91,424) to South Gyeongsang Province Governor Hong Joon-pyo, and 200 million won (US$182,849) to Busan Mayor Suh Byung-soo. Moreover, shortly before he committed suicide, Mr. Sung gave an interview in which he claimed to have passed on bribes of 30 million Korean Won ($27,390) to Prime Minister Lee Wan Koo and 200 million Won ($182,600) to Hong Moon Jong. Since then, the press has consistently followed up with updates and new evidence related to the bribery rising to the surface.

All eight of the figures Mr. Sung accused of accepting bribes have denied the allegations. Investigations are currently still in process. (Reports indicate that progress has been made on gathering necessary evidence to indict Governor Hong Joon-pyo for violating the political funds act. The next target in line is likely to be former Prime Minister Lee Wan Koo, who (perhaps ironically) had led the fight against corruption upon his appointment as Prime Minister just a few months ago.) Still, the accusations are deeply troubling, given that the accused figures are powerful leaders in domestic politics, and Mr. Sung’s list, if it proves accurate, could be evidence of an entirely contaminated political system that could potentially reach the top of the pyramid in South Korean politics. Moreover, the accusations, if corroborated, could also potentially shatter the legitimacy of the 2012 presidential election, particularly given that Mr. Sung alleges that the bribes he paid to Mr. Hong were to be spent for President Park Geun Hye’s presidential election campaign.

Of course, we must be careful not to leap to conclusions—and as a legal matter, these officials are presumed innocent until proven guilty. Nonetheless, given the seriousness and sensational nature of the accusations, and the threat they pose to the legitimacy of the entire South Korean political system, I would advocate two unusual measures in connection with the investigation and potential prosecution of these cases (and similar cases that might arise in the future): Continue reading